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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event Reported) July 12, 1996
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THE COLUMBIA GAS SYSTEM, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-1098 13--1594808
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(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
20 Montchanin Road, Wilmington, Delaware 19807
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(Address of principal executive offices)
Registrant's telephone number, including area code (302) 429-5000
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Item 5. Other Events
Information contained in a News Release dated July 12, 1996,
is incorporated herein by reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
The Columbia Gas System, Inc.
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(Registrant)
By /s/ L. J. Bainter
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Treasurer
Date: July 12, 1996
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Contacts: Media - Bill Chaddock (302) 429-5261
Bill McLaughlin (302) 429-5443
Analysts - Tom Hughes (302) 429-5363
Ken Murphy (302) 429-5471
FOR IMMEDIATE RELEASE July 12, 1996
COLUMBIA GAS' SECOND QUARTER EARNINGS INCREASE $25 MILLION
DUE TO IMPROVED OPERATING RESULTS IN EACH BUSINESS SEGMENT
WILMINGTON, DEL. --- The Columbia Gas System, Inc., (NYSE:CG) today
announced that improved operating results in each of its business segments
resulted in adjusted second quarter net income of $21.2 million, or 39 cents per
share. This compares to an adjusted net loss of $4.3 million, or 9 cents per
share, during the same period in 1995. The $25.5 million improvement was due
primarily to higher rates now in effect, colder weather and higher wellhead
prices for natural gas.
Reported net income in the current quarter was $8.2 million, or 15
cents per share, reflecting an after-tax charge of $18.6 million for severance
and benefits expenses generated by Project Phoenix, an ongoing System-wide
reengineering program, that was partially offset by a $5.6 million after-tax
reduction in the reserve for the loss on the sale of Columbia's southwest oil
and gas properties that was recorded last year. Reported net income in the
second quarter of 1995 was $30.9 million, or 61 cents per share, which included
$7.8 million in bankruptcy-related charges and the beneficial result of not
recording $43 million of interest on prepetition debt during the Chapter 11
proceedings.
Columbia System Chairman Oliver G. Richard III said the current
quarter's strong financial showing was the result of higher rates that
Columbia's transmission and distribution subsidiaries now have in effect,
increased throughput due to 13 percent colder temperatures, and Appalachian
natural gas prices that were 33 percent higher than last year.
He emphasized that each of Columbia's business segments "has shown
improved operating results in the two quarters since emerging from Chapter 11 in
late 1995. Adjusted net income of $172.5 million for the first half of 1996 is
up 90% over adjusted net income for the same period last year. This pattern
emphasizes Columbia's sound financial position, the
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underlying strength of its operating companies and their ability to meet the
challenges of today's competitive energy marketplace."
Richard said that the severance and benefit charges recorded in the
second quarter are the result of implementing Phase I recommendations of Project
Phoenix, which was launched in 1995 to streamline operations and services and
make them more efficient and cost-competitive. The Phoenix studies, which thus
far have reduced staffing throughout the Columbia System by almost five percent,
are still underway. Phase II is expected to be completed and substantially
implemented by year end with some additional charges to earnings likely.
SECOND QUARTER OPERATING RESULTS
Second quarter operating income for the transmission segment was $38.8
million, an increase of $2.9 million over the same period in 1995. The
increase resulted from higher rates, which Columbia Gas Transmission Corp. began
collecting subject to refund in February 1996, that permit recovery of operating
costs that have increased since the company's last rate case in 1991. Costs
associated with the segment's ongoing reengineering program reduced the positive
effect of the higher rates by $6.1 million.
The distribution segment had a second quarter operating loss of $3
million compared to a $7.9 million operating loss in the same quarter last year.
The current period includes $15.1 million of expense for reengineering
initiatives being implemented by the five distribution companies to make their
operations more efficient and customer-oriented. Absent this expense, the
distribution units would have had operating income of $12.1 million due largely
to higher rates in effect in four states and 13 percent colder temperatures that
increased throughput. In 1995, warm temperatures and higher operating costs
contributed to the segment's operating loss.
The oil and gas segment had operating income of $6.4 million in the
current quarter compared to a loss of $200,000 in 1995. The improvement was
principally due to Appalachian gas prices that were 33 percent higher than
during the previous period. The loss in the second quarter of 1995 included the
results from southwest oil and gas operations which were sold effective Dec. 31,
1995.
The other energy segment had an operating loss of $3.1 million in the
current quarter primarily due to $7.4 million in reengineering-related costs.
Absent these costs the segment had operating income of $4.3 million, compared to
$1.7 million last year. The improvement reflects increased gas marketing
activities and higher propane margins and sales.
(more)
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3
In addition to the strong operating results, Richard listed several
key developments involving Columbia subsidiaries that occurred during the
quarter:
- Columbia Gas of Pennsylvania and Columbia Gas of Maryland are seeking
regulatory authorization to initiate pilot Residential Choice
Programs that will give some 30,000 residential natural gas customers
in southwestern Pennsylvania and western Maryland the opportunity to
select from whom they purchase their natural gas.
- Columbia Gas Transmission Corp. expects to reduce the cost of its
previously-announced $350 million market expansion program by $80
million as the result of an agreement to lease capacity from Texas
Eastern Transmission Corp.
- Columbia Gulf Transmission Co. is seeking authorization to provide
more than 170 million cubic feet of natural gas a day to two Louisiana
electric generating plants.
- A newly-formed nonregulated subsidiary is offering new energy-related
services such as an appliance repair and warranty program and billing
insurance to customers.
SIX MONTH RESULTS
Colder temperatures and higher rates led to adjusted net income of
$172.5 million, or $3.28 per share, during the first half of 1996. This was a
90 percent increase over adjusted net income of $90.9 million, or $1.80 per
share, during the same period in 1995.
Reported net income for the current period was $159.5 million, or
$3.04 per share, as compared with $159.7 million, or $3.16 per share, last
year. The current period's results were reduced by the net effect of the
unusual items recorded in the second quarter. Reported income for 1995
benefitted from not recording $83.4 million in after-tax interest expense on
prepetition debt obligations due to the Chapter 11 proceedings.
The transmission segment's operating income during the current period
was $124.4 million. The increase of $11.9 million over 1995 was due primarily
to higher rates. Partially offsetting the positive effect of the higher rates
were the costs incurred in the second quarter to streamline operations and the
effect of $5.3 million in revenues from exit fees that Columbia Gulf
Transmission recorded in the first quarter of 1995.
The distribution segment's operating income of $165 million for the
first half of 1996 represents an increase of $56.7 million over last year.
This reflects the effects of higher rates now in effect and increased
throughput due to colder temperatures. These improvements were tempered by the
reengineering costs recorded in the second quarter.
(more)
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The oil and gas segment had operating income of $17.2 million in the
current period because wellhead prices for Appalachian natural gas prices were
35 percent higher than last year. This compared to an operating loss of
$300,000 last year. The 1995 loss included results from Columbia's southwest
oil and gas subsidiary, which has been sold. The average price for Appalachian
natural gas production for the first half of 1996 was $2.98 per thousand cubic
feet, an increase of 78 cents over 1995.
Colder weather also benefited the other energy segment, resulting in
increased natural gas marketing activities and higher propane margins and
sales. These improvements were tempered by the reengineering expenses recorded
in the second quarter. The net result was operating income of $13.6 million,
which was $4 million higher than during the same period in 1995.
The Columbia Gas System, Inc., is one of the nation's largest natural
gas systems. The publicly traded debt issues of Columbia carry investment grade
ratings. Its operating companies are engaged in all phases of the natural gas
business, provide marketing and fuel management services and generate electric
power, directly or indirectly, serving more than seven million gas users in 15
states and the District of Columbia. Information about Columbia and its
operating units is available on the World Wide Web at
http://www.columbiaenergy.com.
# # #
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THE COLUMBIA GAS SYSTEM, INC.
Summary of Financial Operating Data
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data
- - ---------------------
($ millions)
Total Operating Revenue . . . . . 582.4 454.6 1,785.4 1,485.3
Net Income . . . . . . . . . . . . . 8.2 30.9 159.5 159.7
Operating Income (Loss)
By Segment:
Transmission . . . . . . . . . . 38.8 35.9 124.4 112.5
Distribution . . . . . . . . . . (3.0) (7.9) 165.0 108.3
Oil and Gas . . . . . . . . . . 6.4 (0.2) 17.2 (0.3)
Other Energy . . . . . . . . . . (3.1) 1.7 13.6 9.6
Corporation . . . . . . . . . . (3.1) (2.6) (6.0) (3.3)
----- ----- ------- -------
Total . . . . . . . . . . . . . 36.0 26.9 314.2 226.8
===== ====== ======= =======
Per Share Data
Earnings on Common Stock . . . . . . $0.15 $0.61 $3.04 $3.16
Average Common Shares
Outstanding (millions) . . . . . . . 55.0 50.6 52.5 50.6
Capitalization
- - --------------
($ millions)
June 30, December 31,
1996 1995
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Common Stock Equity
Common stock, par value $10 per share -
outstanding 55,065,869 and 49,204,025
shares, respectively . . . . . . . . . . . . . . . . 550.7 506.2
Additional paid in capital . . . . . . . . . . . . . 736.8 595.8
Retained earnings . . . . . . . . . . . . . . . . . . 213.7 69.8
Unearned employee compensation . . . . . . . . . . . (1.5) -
Less: Cost of treasury stock (1,416,155 shares
outstanding as of December 31, 1995) . . . . . . . . - (57.8)
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Total Common Stock Equity . . . . . . . . . . . . . . . . 1,499.7 1,114.0
Preferred Stock . . . . . . . . . . . . . . . . . . . . . - 399.9
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . 2,004.1 2,004.5
------------ ----------
Total Capitalization . . . . . . . . . . . . . . . . . . 3,503.8 3,518.4
============== ==========
</TABLE>
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THE COLUMBIA GAS SYSTEM, INC.
Summary of Financial Operating Data (Continued)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Operating Data
Oil and Gas Volumes:
Gas Production (billion cubic feet)
Appalachian . . . . . . . . . . . . . 8.1 8.1 16.6 17.2
Southwest . . . . . . . . . . . . . . - 8.1 - 16.7
------ ------ ------ ------
Total . . . . . . . . . . . . . . . . 8.1 16.2 16.6 33.9
====== ====== ====== ======
Oil Production (000 barrels)
Appalachian . . . . . . . . . . . . . 83 80 153 158
Southwest . . . . . . . . . . . . . . - 616 - 1,280
------ ------ ------ ------
Total . . . . . . . . . . . . . . . . 83 696 153 1,438
====== ====== ====== ======
Transmission (billion cubic feet):
Transportation
Columbia Transmission
Market Area . . . . . . . . . . 197.6 194.7 627.1 595.9
Columbia Gulf
Main-line . . . . . . . . . . . 159.1 151.8 329.3 306.7
Short-haul . . . . . . . . . . . 64.0 53.7 133.3 104.4
Intrasegment Eliminations . . . . . . (158.1) (150.7) (324.6) (302.0)
------ ------ ------ ------
Total Throughput . . . . . . . . . . . . . . 262.6 249.5 765.1 705.0
====== ------ ------ ======
Distribution (billion cubic feet):
Gas Sales . . . . . . . . . . . . . . 44.2 37.5 197.1 170.6
Transportation . . . . . . . . . . . . 60.0 58.7 131.7 135.5
------ ------ ------ ------
Total Throughput . . . . . . . . . . . . . . 104.2 96.2 328.8 306.1
====== ====== ====== ======
Degree Days-Distribution Service Territory
Actual . . . . . . . . . . . . . . 705 624 3,807 3,382
Normal . . . . . . . . . . . . . . 580 580 3,559 3,527
% Colder (warmer) than normal . . . 22 8 7 (4)
% Colder (warmer) than prior period 13 2 13 (10)
Bankruptcy-related and Unusual Items
After-tax effect on Net Income
- - ------------------------------------
Reported Net Income . . . . . . . . . . . . . . 8.2 30.9 159.5 159.7
Less:
Bankruptcy related items
Estimated interest costs not recorded on
prepetition debt prior to emergence . . - 43.0 - 83.4
Professional fees and related expenses . - (7.8) - (14.6)
Restructure costs . . . . . . . . . . . . (18.6) - (18.6) -
Adjustment to Southwest oil and gas
operations . . . . . . . . . . . . . . 5.6 - 5.6 -
------ ------ ------ ------
Total adjustments . . . . . . . . . . . . (13.0) 35.2 (13.0) 68.8
------ ------ ------ ------
Net Income after adjusting for bankruptcy and
unusual items . . . . . . . . . . . . . . . . 21.2 (4.3) 172.5 90.9
====== ====== ====== ======
</TABLE>
